Management of the defence estate

Mar 23 2017

The House of Commons Public Accounts Committee (“the PAC”) has yesterday published its findings on the management of the defence estate – land belonging to the Ministry of De-fence (“the MoD”) estimated to cover 1.8 per cent of UK’s landmass and currently valued at £31 billion, making it one of the largest single landholdings in the country.

A key concern for the PAC is the considerable shortfall of funding necessary for the upkeep of the estate, estimated to stand at £8.5 billion over the next 30 years, likely caused by past mismanagement of resources intended to prevent the estate’s decline. In PAC’s view, the steady decline of the defence estate is now a significant cause for concern with regards to the UK’s defence capabilities.

Despite endorsing the objective of selling off 25 per cent of the estate by 2040, the PAC is nevertheless highly sceptical of MoD’s ability to deliver this objective. The following observa-tions and recommendations are particularly welcomed:

1. The PAC expressed concern that that the Defence Infrastructure Organisation (DIO) cannot effectively manage the estate in its current structure due to its inability to retain staff and senior management. The organisation has had three permanent Chief Ex-ecutives in the last two years and has currently around 500 vacant posts. As the PAC has found, there are clearly significant issues with its commercial and project man-agement capabilities. Its role as the direct manager of the defence estates is right to be reconsidered.

2. As the Department reviews its Strategic Business Partner (SBP) role, it must avoid the mistakes of the failed 2014 contract with Capita, which in Committee’s view led to excessive profits for Capita (the contractor was paid £90m between June 2014 and July 2016, of which 50 per cent is estimated to be pure profit) and a failure to trans-form DIO’s performance – this is due to PACs opinion that the 10-year contract signed with Capita to be their SBP and help them make DIO more effective resulted in unsustainable short-term cost-cutting measures which failed to bring lasting, sus-tainable change.

We welcome both the MoD’s commitment to reconciling the UK’s defence capabilities with a drive to achieve value for money, and the PAC’s recommendations for how that may be achieved. As we have previously highlighted, the importance of defence does not justify less scrutiny of the MoD finances – learning from failures such as the £90 million contract with Capita is crucial to maintaining our NATO commitments sustainably.